Ten Small Business Tax Deduction Opportunities

If you are the owner of a small business, you are likely looking for every opportunity that you possibly can to improve your bottom line. While many small business owners will instinctually begin this process by looking for ways to increase revenues, decreasing your annual expenses is an equally viable option.

With tax season rapidly approaching, finding ways to lower your taxes due to the government is one of the best ways for you to improve your current financial situation. In addition to finding various tax credits, small business owners everywhere are discovering the bounty of tax deductibles that are currently available.

A tax deductible will (legally) lower your taxable income, which consequently decreases your total tax expenses. In general, tax deductibles are used to help businesses avoid being taxed on certain necessary costs—this stimulates competition and makes it possible for a larger number of businesses to operate.

In this article, we will discuss ten of the small business tax deductions that can help your business in 2019. Making an effort to take advantage of these tax deductions will immediately improve your business’ financial viability.

1. Vehicle Expenses

If your business uses one or more vehicles in its ordinary course of operations, you will usually be able to deduct the cost of gas and transportation. When doing this, your business will have two available options to choose from. You can either keep track of all vehicle related expenses (gas, oil, etc.) by saving your receipts, or you can use the standard deduction rate offered by the IRS. In 2018, this rate was 54.5 cents per each mile travelled. When doing this, be careful to keep your personal mileage and your business mileage separated.

2. Contract Labor

If your business hires a freelancer or other sort of contractor for a job paying more than $600 over the course of the year, then you will be required by the IRS to fill out a 1099-MISC form. Fortunately, these contracts are tax deductible. In order to make sure your business is able to maximize tax savings and also withstand an audit, it will be important to keep track of each contract you have issued.

3. Advertising

To the surprise of many small businesses, most ordinary advertising costs are also tax deductible. This will include things such as paying for air time (or other types of exposure), the cost involved in producing the ads, hiring an outsourced ad firm, and various others. The IRS offers a pretty generous definition of what can be considered an advertising expense, though it will still be important to make sure all claims are within reason.

4. Depreciation of Physical Capital

Depreciation is not so much an expense as it is a method of allocating your costs over time. But, depending on the depreciation method that your business is currently using (straight line is the most popular), this can still save your business a considerable amount of money. Regardless of the depreciation method you use, make sure that it is consistently applied over time.

5. Computer Software

There are many different business “supplies” that are potentially tax deductible and, unsurprisingly, computer software falls firmly into this category. Any software that is essential to the ongoing operation of your business can be deducted from the total taxes you have due. Because of this, it will be important to save each of your receipts as you make software purchases throughout the year.

6. Employee Benefit Programs

The Federal Government (generally) tries to encourage businesses to offer their employees a wide array of ongoing benefits. Consequently, there are many different employee benefits that are tax deductible and some may even function as tax credits (saving you even more money). These programs may include things such as healthcare, maternity/paternity leave, and other employee-oriented programs.

7. Business Travel

Even in a highly digitized era, travel is still a very important component of the modern business world. Fortunately, there are many different ways that your business can use your travel expenses to lower your annual tax obligations. When travelling be sure to save receipts for lodging, airfare, and other expenses (more details can be found in IRS Publication 463). You may even be able to deduct up to 50% of expenses on select meals.

8. Legal and Professional Fees

Once your business is large enough, you will likely begin to accrue at least some legal or professional fees over time. Even if your business is not involved in any sort of lawsuit, keeping an attorney, accountant, and various other professionals on retainer is still an incredibly common practice. Each of these expenses will be tax deductible.

9. Business Insurance

Regardless of the industry your business may be currently operating in, there are likely many different types of insurance that your business may need to purchase over time. In addition to health insurance for your employees (mentioned above), flood insurance, general insurance, malpractice insurance, and cyber insurance are just a few of the common types of insurance that may be deducted.

10. Professional Development

Lastly, your business may also be eligible to deduct certain professional development expenses. This can include continuing education expenses, fees for certain conferences, and other related events. As a consequence, this will functionally reduce the cost of helping your employees improve their personal skills.

Conclusion

Like most business owners, hearing the term “taxes” likely causes you to feel a bit of a headache. However, due to the incredible number of tax deductions available, this annual source of stress can actually be made a bit more manageable. By keeping these—and other—available tax deductions in mind, your business will be able to breeze through the very busy tax season.

Andrew Paniello | Andrew attended the University of Colorado and earned degrees in Finance and Political Science (Philosophy minor). He is currently a freelance writer with a primary emphasis on business topics. In his free time, Andrew enjoys playing piano, painting, hiking, and playing basketball.

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